Today's Must Read
CVS Health's (CVS) PBM Arm Grows from COVID-19 Measures
Buyouts, Loan Demand Aid Morgan Stanley Amid Lower Rates
Wednesday, June 17, 2020
The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Merck (MRK), CVS Health (CVS) and Morgan Stanley (MS). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.
Merck shares have underperformed the Zacks Large Cap Pharmaceuticals industry over the past year (-10% vs. +5.1%), but the Zacks analyst believes that the company's outlook remains favorable given products like Keytruda, Lynparza and Bridion. Keytruda sales are gaining from continued uptake in lung cancer and increasing usage in other cancer indications.
Animal health and vaccine products remain core growth drivers. The potential separation into two companies makes strategic sense as the remaining Merck should be able to achieve higher profits than the combined company.
However, Merck expects COVID-related business disruptions to impact sales in its Pharmaceuticals as well as Animal Health units in 2020 with maximum impact in the second quarter. Meanwhile, generic competition for several drugs and rising competitive pressure, mainly on the diabetes franchise, will continue to be overhangs on the top line.
Shares of CVS have lost -11.1% over the past six months against the Zacks Retail Pharmacies and Drug Stores industry’s fall of -15.2%. The Zacks analyst believes that company’s recently-introduced Health Care Benefits segment following the Aetna acquisition also holds immense promise.
Within CVS Health’s Retail/LTC and Pharmacy Services segments, the coronavirus pandemic has resulted in greater use of 90-day prescriptions and early refills of maintenance medications. Further, there was improvement in front store volume within the Retail/LTC segment.
Moreover, the year-over-year improvement in the top line was fueled by strong growth in Pharmacy Services segment, which benefited from the upside in specialty services. CVS Health put up a robust performance with better-than-expected figures in the first quarter of 2020. However, the LTC business is facing some industry-wide challenges. Reimbursement risk continues to be a dampener.
Morgan Stanley’s shares have gained +55.9% over the past three months against the Zacks Investment Banking industry’s rise of +37.8%. The Zacks analyst believes that the company’s focus on corporate lending operation and strength in investment management operations will likely support top-line growth in the quarters ahead.
The deal to acquire E*Trade Financial is anticipated to further provide support to the Wealth Management segment. Although the company is aiming to change revenue mix to focus on less capital-market driven sources, the financial impact from the same will likely be seen after some time.
Therefore, a significant dependence on capital markets to generate trading and investment banking revenues makes us apprehensive. Furthermore, near-zero interest rates and elevated operating expenses are other major near-term concerns.
Other noteworthy reports we are featuring today include TJX Companies (TJX), Applied Materials (AMAT) and Enterprise Products Partners (EPD).
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Director of Research
Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>